UNION CITY, CA (May 2, 1997)/FOOLWIRE/ --- ATC Communications released
their third quarter 1997 results on April 30th. Revenues were $24.5 million,
a 6% increase from revenue of $23.1 million for the year-ago quarter. Gross
profit declined 1.1% to $7.699 million from $7.788 million last year. The
gross margin was 31.5% representing a 4.8% increase from the 27% gross margin
recorded last quarter, but a 6.7% decline from Q3 last year. Operating profit
was $730,000, a 67.4% decrease from $2.239 million in the comparable period
last year. Operating profit was lower due to increased overhead incurred
in providing the infrastructure for the company's future growth. Net income
was $413,000, a 64.3% decrease from the $1.157 million recorded for the
comparable 3-month period last year. Earnings per share was $0.02 versus
$0.05 last year.

NINE MONTH RESULTS. For the first nine months of the fiscal year,
revenues increased 18.7% to $76.1 million from $64.1 million for the same
period last year. Gross profit rose 17.4% to $23.6 million from $20 million
for the prior period. Gross margin was constant at 31%. Operating profit
was $5.5 million, a 2.7% decrease from the $5.6 million for the comparable
period last year. Net income was $3.384 million, an 11.1% increase from the
$3.36 million for the comparable nine-month period last year. Earnings per
share was $0.14 versus $0.13 last year.

CASH. The company has a working capital position of almost $14 million
and they haven't had any material changes from the last quarter in terms
of their balance sheet positions. The details of their credit facility will
be outlined in the 10-Q. There is no prohibition of them using their debt
facility to purchase stock. Their cash flow is adequate for their capital
expenditure requirements looking forward, as is their debt capacity. They
feel very comfortable that, given their approach to pricing of acquisitions,
that they will be able to obtain financing if required to get them completed.

ACQUISITION STATUS. ATC will continue to focus on acquisitions as
an avenue of growth. They are currently in discussions with several potential
acquisition candidates and they believe that these acquisitions will fit
with their corporate and operating strategy and will be structured to be
accretive to ATC shareholders. In terms of the letter of intent discussed
in the last conference call, their progress on that acquisition was delayed
by the seller. However, they are continuing their negotiations with that
party at this time. The company they are in talks with provides them expansion
in remote centers, small remote centers in locations they are already in
today and provide ATC additional capacity. Second, they have a great deal
of competency in their management team in remote locations that will help
ATC expand their business. Third, ATC feels the company's technology base
is equal to the technology base they have today but allows them to get into
other markets they are pursuing. Finally, they are a financially stable company.
ATC has no definitive agreements or binding letters of intent in place with
any acquisition candidates at this time.

STATUS OF MAJOR ACCOUNTS. Comparing year-to-year they see some considerable
growth from their major accounts -- American Express and AT&T -- in
particular, the confidence show by American Express in their ability to perform.
They continue to increase the amount of work they do for American Express
and it will have a fairly significant impact in 1997. If they take a look
at their portfolio in 1997 and try to take a look year-to-year at the different
industries where they see a big impact, it seems like the communications
industry has the most sensitivity that they have in their portfolio in terms
of flattening revenue trends. The communications industry as a whole is somewhat
retrenching for its new approach in the long distance and local market areas.

GTE. The biggest impact from an account position in the third quarter was
GTE who is a major contributor to ATC's revenue base completed its migration
internally from its centers that ATC was handling to their own internal centers.

AMERICA ONLINE. What will have a big impact on ATC in the fourth quarter
will be that their account with America Online, because of regulatory issues
they are going through, have been stopped in doing any marketing until they
get their infrastructure in place so that they can move forward. Once AOL
completes that, ATC thinks there will be an opportunity to pick up that business
once again, but they will be losing that in their portfolio.

AT&T. On a quarter-to-quarter basis from last quarter, they see a downward
trend with AT&T and they any vendor that has been dealing with AT&T
in the telesourcing area has seen a drop because of AT&T's refocusing
and how they are having to address the competitive environment. What they
saw was less than anticipated growth in terms of their forecast, with regard
to AT&T, not necessarily a decline in that account quarter over quarter
for the prior period. Sequentially they did see a decline that was approximately
10% or so. The indications ATC has received from AT&T is that their slowdown
in marketing programs is across-the-board as they are retrenching in a new
mode of competition. The reduction has been primarily in the outbound side.
ATC has experienced some reduction on the inbound side, but it has been primarily
on the outbound side because AT&T is retrenching and redoing their marketing
programs at this time. AT&T does judge ATC on the basis of their competitors
and price/performance and ATC is at the top of the rating on both the inbound
and the outbound side. That is why their discussions with AT&T indicate
that they will continue to grow volume from this point forward.

AMERICAN EXPRESS. Quarter-to-quarter on American Express, it is growing
very rapidly and ATC continues to have discussions with them on how they
may be able to expand their business there.

COST REDUCTION PLAN. They are facing the slower growth in revenues,
slower than they expected, but they are committed to manage their overhead
at the appropriate levels. They have already taken action and have put plans
in place to reduce their expenses at the operating level and they are focusing
a great deal on SG&A and nonessential costs including nonessential staff
and recurring costs. Those have been put in place and should begin having
an impact in the next quarter. They do not expect margins to return to normal
target levels until Q1 1998, however. At the end of the quarter, they had
3200 seats.

PIPELINE. They are really making an aggressive pursuit of changing
the entire portfolio of business. The downfall we have seen in the revenue
base has been because of the volatility of short term contracts, that has
been primarily built on a cost basis. The focus they have from the sales
and marketing positioning is focusing on long-term contracts with value.
This would include, for example, work in call center management and full-service
outsourcing. In terms of call center management, they mean the type of call
center management they are doing at Pac Bell where it is ATC's facility,
systems, and management, but they are facilitating Pac Bell's people. Another
example is the work they are doing at the Chicago Transit Authority where
it is the Transit Authority's facilities and systems, but ATC's people and
ATC does the recruiting and management of them. ATC thinks that on an ongoing
basis and in the future this is a very viable segment of the marketplace
for them but also has an additional value proposition of talking with Fortune
500 and Fortune 1000 companies about the possibility of purchasing their
assets involved in call centers and allowing ATC to use their core competencies
to run those call centers while the company takes that capital for use in
their own plant and equipment. In turn for that, ATC is going to be looking
for a long term contract such that the net present value of that contract
reflects their investment in the initial capital. ATC thinks that is a very
lucrative position for them and they are having discussions today in the
marketplace in that area.

The next area of pursuit is full-service outsourcing, much like they are
doing today with American Express. It is a big opportunity to take a look
at the Fortune 1000 companies that are extremely interested in leveraging
other companies' core competencies while they focus on their own.

"GAP ANALYSIS." One of the things they did when looking at these two
market segments in the past quarter was take a look at the bandwidth of
competency held within their own company in order to go out and wave a banner
of full outsourcing and call center management. What they did find in their
"gap analysis" is that they needed two pieces. The first is a consulting
front end and the second is a fulfillment piece at the tail end. Their competency
in the past and today is the actual integration and implementation of call
center management which they refer to as telesourcing. What they have done
is gone out in a pursuit of filling those gaps and they recently announced
their alliance with Arthur Andersen who they will be using in their alliance
to do the front-end consulting management for them in taking a look at these
larger opportunities. And, they will be doing the fulfillment piece through
an alliance they have with ISI and an organization through Cushman-Wakefield.
This offering is being well received and they have a backlog of business
in their portfolio underway.

SALES CYCLE AND OUTLOOK. What they have found as a result of getting
these longer-term opportunities in their pipeline is that they witness a
longer sales cycle. Where before sales cycles for RFPs were somewhere in
the 30-45 day timeframe, they are now seeing sales cycles they estimate are
6-9 months. Because of that they will see a possible closing of a number
of these in the fourth quarter with revenue impact coming in the first quarter
of 1998. They are confident that their pipeline of business with this type
of activity will have an impact on fiscal 1998. They expect to attain a 35-40%
growth rate in fiscal 1998 and that a fair amount of that will come from
new business of the type just discussed above.

GOVERNMENT SECTOR. One of the other alliances they mentioned, ISI,
they have found in market research and because of taking a look at the Federal
and state government is that there is a big move in the government sector
to do call center management. ATC partnered with ISI because of their premier
position in the government as a prime contractor already involved in that
area as well as a previous relationship they have with Cushman-Wakefield
on the fulfillment side. They already have several responses to RFPs into
the government sector today for evaluation and they feel very confident about
that.

OTHER ISSUES. They talked about changing some of the infrastructure.
They have completed a great deal of that -- changing out their computer systems
-- but they still have the ongoing maintenance of that. They are already
seeing a positive impact by the implementation and change of that new
infrastructure. They are making a big effort in terms of changing their basic
model of having large core megacenters into having smaller remote centers
out away from the Dallas/Ft. Worth area. The reason they are doing that is
to reduce their overall cost burden and labor is certainly the biggest extent
of their cost. The labor pool they are finding in the Dallas/Ft. Worth area
is quite competitive and they think they are just simply competing with other
people in the same marketplace. They have looked at sites and the optimum
size they are targeting is a 300-seat center. They should have the first
one in place in the August timeframe. They are focusing on attrition and
turnover. It is an effort that all the senior management is focusing on because
it has a great impact on their profitability.

VERTICAL MARKETS. They were going to start focusing on some new vertical
markets, one of which is the utilities industry and one of which is the financial
services industry. They are responding to RFPs in the government sector.
They are not responding necessarily to the RFPs, but they have several proposals
of which they have generated the business opportunity in the utilities industry
as well as the financial services industry.

STOCK REPURCHASE. They announced a share repurchase program and indicated
that they will be in the market and the company is committed to doing that.
They think the stock is undervalued at this point and think it is a good
use of their capital to own their shares at this time. They wouldn't give
specifics on timing or target prices for obvious reasons, but said it would
happen shortly.

INSIDER SELLING. They were asked to comment on the magnitude of insider
selling, the reasons, and whether it will continue. They responded that their
chairman unfortunately is in a position where he has had stock sold out from
under him in a margin account. They do not know the magnitude of that or
whether it will continue or not. That is subject to the account managers
at the firm where he had the account. He purchased a great deal of stock
at higher levels because he believed in the company. He still does believe
in the company but, unfortunately the recent decline in the stock price resulted
in a margin call.

TAKEOVER POSSIBILITIES. The company was asked whether, with the stock
price at the current level, they have any concerns that the company is a
likely takeover target. The responded that the company is not for sale, but
they have a responsibility as board members in the event that there is something
brought to the table. They will have to evaluate it for the benefit of their
shareholders. They wanted to make it clear though that the company is not
for sale and they are very bullish on their long-term opportunities. They
feel that the stock is clearly undervalued and that is why they are looking
at the share repurchase program. But, they have a fiduciary responsibility
to their shareholder that if someone comes in the door they have to take
a look at it, but nothing like that has happened to date.

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